Manufacturing Expenses

Variable                                $3,250,000

Fixed overhead                       640,000       3,890,000

Gross Margin                                                  $4,610,000

Selling and administrative expenses

Commissions                           $580,000

Fixed marketing expenses       300,000

Fixed admin expenses               450,000      1,330,000

Net Operating Income                                     $3,280,000

Fixed Interest expenses                                       230,000    

Income before Taxes                                      $3,050,000     

Income Taxes (21%)                                            640,500

Net Income                                                     $2,409,500

Your company is considering out-sourcing the sales and marketing to an agency specializing in these types of sales. The outsourcing would remove the commissions, reduce the marketing by $270,000, and reduce the fixed administrative expenses by $35,000. The out-sourcing firm, Jangler Marketing, will charge a fee of 14% of sales. Jangler requires a 3-year contract. Jangler believes that it can increase sales by 10% for 2019 and 13% each year after (2020 and 2021). The company believes that with its current sales and marketing staff, sales will increase by 8% for 2019 and 9% in each year after (2020 and 2021).

1.Prepare contribution format projected income statements for 2019, 2020 & 202a assuming the company hires Jangler Marketing.

2.Prepare contribution format projected income statements assuming the outsourcing is rejected.

(Please show how you got each answer)

The following information relates to Bailey Ltd a retail business selling office furniture.

The table below provides the sales and purchases for the company:

Additional information includes:

• Cash sales are 20% each month.
• Credit sales are expected to be collected 60% one month after sale, 20% two months after the sale and 15% 3 months after the month of sale.
• Accounts Payable is settled 40% one month after purchase and the balance is paid two months after purchase. All purchases are on credit.
• Cash payments for expenses are 10% of each month’s sales.
• Depreciation on the machines for January 2020 is estimated to be $2,000.
• The cash balance on 31 December 2019 is $5,400.
• The company wishes to maintain a monthly minimum balance of 10,000 and has a line of credit arrangement with Greater Bank.     

Required:

(a) Prepare the Cash Budget for the month of January 2020.
(b) Explain any two key changes you would make to the Cash Budget to ensure better cash management in the company.

7.         Hadley Company has the following securities in its portfolio on December 31, 2020:

                                                                           Cost             Fair Value

15,000 shares of Brady Corp. Common         $450,000         $460,000

100 shares of Sanders, Inc. Common             115,000             90,000

2,000 shares of Peters, Inc. Preferred             210,000         195,000

                                                                        $775,000         $745,000

All of the securities were purchased in 2020. In 2021, Hadley completed the following

securities transactions:

March 1           Sold 5,000 shares of Brady, Corp. Common for $170,000

August 1          Bought 1,000 shares of North Stores, Common @ $40 each plus fees of $1,000.

The Hadley Company portfolio of securities appeared as follows on December 31, 2021:

                                                                           Cost             Fair Value

10,000 shares of Brady Corp., Common        $300,000         $280,000

100 Sanders Convertible Bonds                     115,000         102,000

1.000 shares North Stores Common                   41,000             42,000

2,000 shares of Peters, Inc. Preferred             210,000         220,000

                                                                        $666,000         $644,000

On the form provided prepare the general journal entries for Hadley Company for:

(a)        the 2020 adjusting entry.

(b)        the sale of the Brady stock.

(c)        the purchase of the North Stores' stock.

(d)       the 2021 adjusting entry. (10 points)

Africa Ltd manufacture tennis racquets. The company uses the job costing system to cost its production. The following information relates to Poma Africa Ltd for the month of April 2020:

Additional information

• Factory overheads are applied at a rate of 10% of total direct cost.
• The only job still in process at 30 April 2020 was L49. All other jobs were completed during the month.
• Job C23 was completed at a total cost of R25 630, this amount includes applied overhead costs of R1 410.
• Sales during April were as follows: A33: All 20 racquets were sold at cost plus 40% mark‐up.
• F54: 23 racquets were sold at a price of R290 per racquet. C23: All 55 racquets were sold at cost plus 35% mark‐up.
• Actual factory overheads for April 2020 were R3 250.
• Marketing and distribution expenses amount to R4 700 for the month of April 2020.
• Ignore spoilage.

Required:

Round to two decimal places where necessary.

7.1 Calculate the cost of jobs A33 and F54 completed during April 2020.

7.2 Calculate the closing work‐in‐process as at 30 April 2020.

7.3 Calculate the net income for the month of April 2020.

7.4 Calculate the closing balance of finished goods as at 30 April 2020.

7.5 Calculate the over/under applied overhead for April 2020.

Problem Facts Information related to the Sosa Company for the year 2020: Common Stock As of the end of 2020, Sosa had 240,000 shares of common stock outstanding. The shares are due to the following common stock transactions:  January 1, 2020 – 100,000 shares of common stock outstanding  April 1, 2020 – issued an additional 50,000 shares for cash  July 1, 2020 - issued a 2 for 1 stock split  September 1, 2020 – purchased 60,000 shares for treasury stock Preferred Stock As of the end of 2020, Sosa had 30,000 shares of 6%, $10 par value, cumulative, convertible preferred stock outstanding. The stock had been outstanding all year and the conversion ratio was each share of preferred stock is convertible into 3 shares of common stock. Bonds Payable As of the end of 2020, Sosa had $800,000, 7% bonds payable outstanding. The bonds had been outstanding for the entire year and each $1,000 bond was convertible into 10 shares of common stock. Options Sosa also had 10,000 common stock options outstanding all year. Each option allowed the holder to purchase 1 share of Sosa’s common stock for $45. During 2020, the average market price of Sosa’s common stock was $48 per share. Additional Information Sosa’s 2020 net income was $580,000, and the company’s income tax rate was 34%. REQUIRED 1. Compute the weighted average number of common shares Sosa will use to compute basic earnings per share. (5 points) 2. Compute 2020 basic earnings per share (3 points) 3. Identify which of the potentially dilutive securities (preferred stock, bonds, options) are dilutive (support must be shown to receive credit for this question) (8 points) 4. Compute diluted earnings per share (4 points)

Basic EPS = $2.20

Diluted EPS = $1.68

Problem Facts Information related to the Sosa Company for the year 2020: Common Stock As of the end of 2020, Sosa had 240,000 shares of common stock outstanding. The shares are due to the following common stock transactions:  January 1, 2020 – 100,000 shares of common stock outstanding  April 1, 2020 – issued an additional 50,000 shares for cash  July 1, 2020 - issued a 2 for 1 stock split  September 1, 2020 – purchased 60,000 shares for treasury stock Preferred Stock As of the end of 2020, Sosa had 30,000 shares of 6%, $10 par value, cumulative, convertible preferred stock outstanding. The stock had been outstanding all year and the conversion ratio was each share of preferred stock is convertible into 3 shares of common stock. Bonds Payable As of the end of 2020, Sosa had $800,000, 7% bonds payable outstanding. The bonds had been outstanding for the entire year and each $1,000 bond was convertible into 10 shares of common stock. Options Sosa also had 10,000 common stock options outstanding all year. Each option allowed the holder to purchase 1 share of Sosa’s common stock for $45. During 2020, the average market price of Sosa’s common stock was $48 per share. Additional Information Sosa’s 2020 net income was $580,000, and the company’s income tax rate was 34%. REQUIRED 1. Compute the weighted average number of common shares Sosa will use to compute basic earnings per share. (5 points) 2. Compute 2020 basic earnings per share (3 points) 3. Identify which of the potentially dilutive securities (preferred stock, bonds, options) are dilutive (support must be shown to receive credit for this question) (8 points) 4. Compute diluted earnings per share (4 points) Check Figures:

Basic EPS = $2.20

Diluted EPS = $1.68

The slope of a regression tells us:

1. The covariance of X and Y
2. The marginal impact of X on Y
3. The marginal impact of Y on X
4. The level of X when Y is zero
5. The level of Y when X is zero

2. The intercept of a regression tells us:

1. The level of Y when X is zero
2. The level of X when Y is zero
3. The marginal impact of Y on X
4. The marginal impact of X on Y
5. The covariance of X and Y

3. ∑(Y – Ŷ)² is essentially a measure of

1. How much our predictions miss the actual data
2. How much variance we explain with X
3. How much variance we explain with Y
4. The covariance between the prediction and X
5. How much our predictions deviate from X

4. The main difference between the calculation of Pearson’s r and the slope of a regression is

1. The inclusion of the covariance in the numerator
2. The inclusion of the SSx in the denominator
3. The inclusion of the SSy in the denominator
4. The inclusion of the SSx in the numerator
5. The inclusion of the SSy in the numerator

5. A regression with a slope of 4 tells us

1. The slope is large and significant
2. The slope is large but not significant
3. The slope is small and significant
4. The slope is small and not significant
5. Not enough information to decide

6. A significance test for beta that fails to reject the null

1. Cannot distinguish beta from zero
2. Lacks sufficient information to make a decision
3. Can distinguish beta from zero
4. Tells us that beta is negative
5. Tells us we have made a Type I Error

The slope of a regression tells us:

1. The covariance of X and Y
2. The marginal impact of X on Y
3. The marginal impact of Y on X
4. The level of X when Y is zero
5. The level of Y when X is zero

2. The intercept of a regression tells us:

1. The level of Y when X is zero
2. The level of X when Y is zero
3. The marginal impact of Y on X
4. The marginal impact of X on Y
5. The covariance of X and Y

3. ∑(Y – Ŷ)² is essentially a measure of

1. How much our predictions miss the actual data
2. How much variance we explain with X
3. How much variance we explain with Y
4. The covariance between the prediction and X
5. How much our predictions deviate from X

4. The main difference between the calculation of Pearson’s r and the slope of a regression is

1. The inclusion of the covariance in the numerator
2. The inclusion of the SSx in the denominator
3. The inclusion of the SSy in the denominator
4. The inclusion of the SSx in the numerator
5. The inclusion of the SSy in the numerator

5. A regression with a slope of 4 tells us

1. The slope is large and significant
2. The slope is large but not significant
3. The slope is small and significant
4. The slope is small and not significant
5. Not enough information to decide

6. A significance test for beta that fails to reject the null

1. Cannot distinguish beta from zero
2. Lacks sufficient information to make a decision
3. Can distinguish beta from zero
4. Tells us that beta is negative
5. Tells us we have made a Type I Error

HYPOTHESIS TESTING SUMMARY ACTIVITY

Part 1: Overview of the Hypothesis Test for the Population Proportion Answer the following questions:

1) The general form of the test statistic for the hypothesis test for a population proportion is shown below. Label the different components of the test statistic.

2) For the following situations, state the null and alternative hypothesis. Then determine whether the alternative hypothesis is one-sided or two-sided.

a) A toy manufacturer claims that 23% of the 14-year-old residents of a certain city own a skateboard. A sample of fifty 14-year-olds shows that nine own a skateboard. Is there enough evidence to show that the percentage has changed?

b) At a large university, a study found that 25% of the students who commute travel more than 14 miles to campus. Recently, the university built more housing closer to campus so they believe that the proportion has decreased.

c) For students who first enrolled in two-year public institutions in fall 2007, the proportion who earned a bachelor’s degree within 6 years was 0.399. The president of Joliet Junior College believes that the proportion of students who enroll in her institution have a higher completion rate.

3) Use the information in question 2a (toy manufacturer) to answer the following questions.

a) Calculate the test statistic and draw a diagram with a normal curve to represent the sampling distribution of ??� in the context of this situation.

b) If the sample size of the survey was increased, would the test statistic increase or decrease? Would it give us more or less evidence against H0 ?

On 3/31/2020, Company ABC released its quarterly report, showing the sales in the first quarter had tumbled 30% as pandemic hit. However, the stock price for company ABC rose by 3% (instead of fell by 3%) after the report is released. Does this mean a failure of the Market Efficient Theory?

On 3/31/2020, Company ABC released its quarterly report, showing the sales in the first quarter had tumbled 30% as pandemic hit. However, the stock price for company ABC rose by 3% (instead of fell by 3%) after the report is released. Does this mean a failure of the Market Efficient Theory?